iPhone spurs growth in China's 3G market

Selling out in stores across China, the iPhone 4 has not only been a success for Apple, but has also given mobile provider China Unicom an edge by helping it sign up more users to its 3G next generation mobile services.

Selling out in stores across China, the iPhone 4 has not only been a success for Apple, but has also given mobile provider China Unicom an edge by helping it sign up more users to its 3G next generation mobile services.

Last week, China Unicom reported a total of 10 million 3G users, just one year after the company launched the new mobile service. At the same time, it reported selling 100,000 iPhone 4s less than a week after the product was launched in China on Sept. 25.

Credit for the company's continued growth with its 3G users will partly be due to sales of the iPhone, analysts say. "The iPhone has had a significant role, and now that they've landed the iPhone 4, it will have an even more significant role," said Mark Natkin, managing director of Bejing-based Marbridge Consulting.

Currently, China Unicom is the only mobile provider for the iPhone in the country. In developing its 3G networks, the company has adopted the WCDMA (Wideband Code Division Multiple Access) standard, which is widely used outside of China.

Analysts note this has made it easier for major cellphone makers like Apple to bring their devices to China Unicom, so the company can offer a stronger selection of smartphones. In the company's last interim report for the end of June, China Unicom said that 91 percent of its 3G users come from mobile handset purchases.

Rival China Mobile, the country's largest mobile provider, still claims to have the most 3G users at 13.4 million. But a significant portion of those subscribers -- about 35 percent -- are estimated to come from sales of China Mobile's "wireless wireline" phones, which use 3G, but function more as landline phones, said Natkin. "Suddenly, China Mobile's numbers don't look so fabulous," he added.

China Mobile was the first mobile provider to launch its 3G services in China, making it available in January 2009. But it did so using the homegrown TD-SCDMA (Time Division Synchronous CDMA) 3G standard, a new technology not used outside of the country. As a consequence, cellphone makers must modify their existing handsets with this standard in order to access China Mobile's 3G network. Analysts say this has led to a weaker selection of smartphones offered through the company.

Originally China Mobile was aiming to reach 50 million to 80 million 3G subscribers by the end of this year. But the company's efforts have so far lagged behind expectations, said Benjamin Joffe, CEO of Internet research firm Plus Eight Star. A device like the iPhone, which uses WCDMA, could never be launched with China Mobile's 3G network, he noted.

"So despite the weaker marketing power and image of China Unicom, it is proportionally doing a much better job with 3G than China Mobile, which should have about triple the number of China Unicom's users, not just 40 percent more," he said.

Despite its popularity, the iPhone 4 will not achieve a major market share in the country, Joffe added. Before the iPhone 4 officially went on sale in China, Apple had only a 7.1 percent share of the Chinese smartphone market, according to Beijing-based research firm Analysys International.

But analysts say the iPhone has made more Chinese users consider buying a smartphone and signing up with a 3G network.

"We are getting more people willing to make the leap. They will buy the smartphone, then they will get the 3G," said David Wolf, CEO of Wolf Group Asia, a Beijing-based technology consultancy. "The iPhone has been getting people aware of what that 3G user experience can be like."